Fairway Shares Surge in Debut

Richard Drew/Associated PressCharles Santoro, third from right, the chairman of Fairway, and Herb Ruetsch, the New York grocery store’s chief, celebrate the company’s initial public offering.

Investors filled their shopping carts with shares of Fairway Group Holdings on Wednesday.

The stock of the grocery store chain surged 33 percent in its public debut on the Nasdaq stock exchange. Trading under the ticker symbol FWM, Fairway opened at $18.07 a share after pricing its initial public offering at $13 on Tuesday evening, above the expected range of $10 to $12, raising $177.5 million.

The stock gave up some of its initial gains during the day and closed at $17.35 a share on heavy volume, up $4.35.

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Fairway, which remains controlled by the private equity firm Sterling Investment Partners, is hoping investors will get behind its plans to expand. Once known primarily for its popular market on Manhattan’s Upper West Side, Fairway is now a 12-store grocery chain with ambitions of opening 300 outlets across the country.

An investment from Sterling in 2007 has helped spur that growth. With stores in New York, New Jersey and Connecticut, Fairway is making plans to add new stores at a rate of three to four a year.

But the strategy comes with risks. Fairway lost $11.9 million in the fiscal year that ended in April 2012, even though sales increased 14 percent, to $554.9 million. Its debt has grown, reaching $203.6 million last April.

Fairway has formidable competition even in New York, where Whole Foods, a chief rival, has aggressively expanded in recent years. Though Fairway offers a wide selection of products at reasonable prices, some longtime shoppers are looking elsewhere.

Some of the risks associated with investing in the stock are quirkier. The landlord for about half of the Fairway location on Broadway has the right to terminate the lease, with at least 18 months’ notice, at any time after June 30, 2017, to renovate.

But the store has a devoted following. One loyal customer, Mordecai Rosenfeld, 83, said on Tuesday that he might consider buying shares, “if they throw in some olives.”

In addition to financing the company’s expansion, proceeds from the I.P.O. will pay for certain accrued dividends and pay bonuses totaling about $7.3 million. Howard Glickberg, vice chairman of development at Fairway, and the grandson of the company’s founder, is receiving a $1.8 million bonus.

Credit Suisse, Bank of America, Jefferies and William Blair handled the offering.

A version of this article appears in print on 04/18/2013, on page B9 of the NewYork edition with the headline: Shares of Fairway Jump 33% In Their First Day of Trading.